Do you have any students in your family, or are you a student yourself? If so, then the American Opportunity Tax Credit may help you decrease your tax obligations. Like the old Hope Credit, you can claim this new tax credit for tuition and certain fees you pay for higher education either last year. But there have been some changes to the benefit of students and those who claim students.

Below is a list of the new changes for the American Opportunity tax credit.

Higher Amount You can Claim

  • The new American Opportunity tax credit limit is $2,500.

New Definition for Tuition and Qualified Expenses

  • Tuition is still covered for the American Opportunity tax credit, but now course materials are also covered, which include books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.

Refundable Tax Credit

  • Unlike the Hope Credit, you can now get up to $1,000 of the tax credit refunded to you by Uncle Sam or 40% of it; this will make a difference to lower-income taxpayers who owe smaller amounts of taxes.

Help for Middle and Higher Income Earners

  • Phaseout begins at $80,000 for single filers, or $160,000 for married joint filers.
  • Full credit is allowed to help offset the Alternative Minimum Tax.

Years Three and Four of the Post-Secondary College Years can be Claimed

  • The American Opportunity tax credit can be claimed for 4 years of post-secondary education, versus the first two years of the post-secondary education under the Hope Credit.

In order to claim the American Opportunity tax credit, you will need to fill out form 8863 and attach it to Form 1040 or 1040A.

Please note, you cannot claim both the American opportunity tax credit and the tuition and fees deduction in the same year for the same student. To figure out which tuition tax benefit to take, review Tuition Deduction vs. Tuition Tax Credit.

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Comments to American Opportunity Tax Credit Expands Tuition Tax Credit

  1. I’ll make sure we have form 8863 to look over when we check out the rest of our return from our CPA. Thanks!

    Budgeting in the Fun Stuff

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